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Power Transmission in India: Ramping up to integrate renewables [free access]

October 13, 2020

India’s electricity transmission sector is gearing up to face the challenges posed by a changing power demand and energy mix. In order to meet the future peak load, which is expected to reach 226 GW by 2022 and 267 GW by 2025 (from 184 GW presently), huge investments are required to strengthen and ramp up the country’s transmission system. The government’s ambitious plan to expand renewable energy to 175 GW by 2022 is a key driver for grid expansion. Private investments will continue to play a significant role in grid expansion as competitive bidding gains momentum. The extraordinary circumstances caused by COVID-19 will not alter the country’s medium- to long-term plans with respect to power transmission.

 

Global Transmission provides an overview of the recent trends and developments in the power transmission segment.

 

Transmission infrastructure

As of August 2020, the total transmission line length stood at 4,28,582 circuit km (220 kV and above) and the alternating current (AC) substation capacity stood at 9,56,003 MVA. While the line length grew at a compound annual growth rate (CAGR) of 6.5 per cent, the AC substation capacity grew at about 11.3 per cent between 2011-12 and 2019-20. In addition, the high voltage direct current (HVDC) substation capacity stood at 25,500 MW.

 

The interregional transmission capacity has also grown significantly over the years and stood at 1,02,050 MW as of March 2020. Significantly, 27,000 MW of interregional transfer capacity has been added during the last three years. As a result, interregional power transfer increased from 138 GWh in 2016-17 to over 197 GWh 2019-20. The plan is to add another 16,000 MW by 2022 and take the interregional transfer capacity to 1,18,050 MW.

 

Recent years have witnessed a significant increase in private participation, with their share in total line length increasing from 3.3 per cent in 2011-12 to 7.4 per cent in 2019-20 and that in substation capacity increasing from only 0.5 per cent to close to 4 per cent. However, Power Grid Corporation of India Limited (POWERGRID) continues to dominate the country’s transmission sector with 1,63,222 circuit km of lines and 4,09,898 MVA of capacity.

 

Policy and regulatory developments

In August 2020, the Ministry of Power (MOP) issued a notification extending the waiver of inter-state transmission system (ISTS) charges and losses on the supply of power generated from solar and wind power projects until June 30, 2023 (from December 31, 2022 previously). As per the notification, no ISTS charges will be levied for 25 years from the date of commissioning of the power plants for the supply and sale to entities having renewable purchase obligations.

 

In July 2020, the MOP issued guidelines for determining compensation for acquiring right of way (RoW) in urban areas. This will be in addition to the compensation towards normal crop and tree damages. This follows the recommendations of the MOP-constituted committee on the matter after deliberation with the states. Notably, a large number of states have not adopted related guidelines issued by the MOP in October 2015. The final decision of implementing the latest guidelines also rests with the state governments. It is therefore necessary for the states to support developers in addressing RoW issues. This requires urgent attention as transmission project completion deadlines have been compressed to nearly 18 months as against 36 months in the past in order to match the commissioning schedule of renewable energy projects.

 

In June 2020, the MOP directed POWERGRID to set up a wholly-owned subsidiary to carry out statutory functions of the central transmission utility (CTU) as per the Electricity Act, 2003. Previously mooted in 2016, the plan to separate the CTU function from POWERGRID did not materialise. As a CTU, its functions include wheeling of power generated by producers, planning transmission systems and operations, and collecting tariff from power generators and state utilities using the transmission infrastructure. It has been criticised for being at an advantage, given that it already has prior knowledge of projects due to its involvement in the network planning process.

 

In another development, in September 2020, the Cabinet Committee on Economic Affairs approved the monetisation plan for POWERGRID’s tariff-based competitive bidding (TBCB) projects through the infrastructure investment trust (InvIT) model. This will include the sale of both under construction projects and those that will be acquired by the company in future. The proposed InvIT would allow the company to manage its own funding requirements. In the first block, POWERGRID is expected to monetise five TBCB assets valued at INR71.64 billion. This monetisation will be as per the directives and targets fixed by the Centre.

 

In May 2020, the Central Electricity Regulatory Commission (CERC) notified the Sharing of Inter-State Transmission Charges and Losses Regulations, 2020. It will supersede the existing regulations (2010) and come into effect from November 2020. The new regulations reviewed the existing point of connection mechanism for determining transmission charges. The yearly transmission charges comprising charges of ISTS licensees and intra-state transmission lines will now be recovered on a monthly basis under four components — national component (renewable energy and HVDC), regional component, transformer component and AC system component. It will apply to all designated ISTS customers, ISTS licensees, the National Load Despatch Centre (NLDC), regional load despatch centres (RLDCs), state load despatch centres (SLDCs) and regional power committees (RPCs).

 

In June 2020, CERC issued an advisory to the MOP with recommendations to revise the TBCB guidelines for efficient and economic transmission development. This was done in light of the several petitions filed before the commission seeking the adjudication of disputes by invoking the provisions of the transmission service agreement or standard bidding documents. It has suggested modifications related to survey report, project structure, quality, commercial operation date, penalty structure, foreclosure and performance review of transmission system providers, among other things.

 

COVID-19 impact and preparedness

Power transmission, categorised as an essential service by the MOP during the COVID-19 lockdown period, continued as per guidelines and protocol in the country. Notably, the transmission system has been maintained with high availability. POWERGRID ensured extensive use of the national transmission asset management centre and regional transmission asset management centres (NTAMC/RTAMC) as well as enhanced use of IT and communication.

 

Significantly, Power System Operation Corporation (POSOCO) successfully managed the unprecedented challenge of maintaining grid stability during the nine-minute event of switching off lights across the country on April 5, 2020 to express solidarity. Such an unprecedented ramp-down and build-up of electricity load within a small window has not been seen anywhere in the world on such a scale.

 

Broadly, the lockdown drastically reduced industrial and commercial activities, and these segments saw a considerable decline in demand for electricity (over 25 per cent). This had a significant impact on the liquidity of Indian power utilities. The central government announced an INR900 billion liquidity infusion package for distribution companies (discoms) to help clear outstanding dues to transmission and generation firms. POWERGRID has been assisting states wherever required and offered a rebate of Rs10.75 billion to discoms.

 

To ensure liquidity, one of India’s largest state transmission utilities, Maharashtra State Electricity Transmission Company Limited (MAHATRANSCO), deferred/curtailed certain expenditure and loan installments until June 2020 to restrict cash outlay. Further, it sought short-term loans to meet working capital needs. It plans to take up future projects on a need basis, mainly to relieve transmission congestion and improve system reliability, and only after securing the required capital expenditure (capex). Some utilities such as Gujarat Electricity Transmission Corporation Limited have not altered the planned capex for 2020-21 but anticipate a slight shift in the award of tenders.

 

By June 2020, POWERGRID resumed work progressively at many sites with the available manpower. In some places, the company has been facing challenges due to restrictions on the movement of labour and the severity of the pandemic. It has been in the process of remobilising the workforce.

 

Almost all transmission utilities are working on digitisation of works in all departments. State utilities are making arrangements for remote inspection and maintenance. For immediate fault detection and faster rectification, MAHATRANSCO has started using drones to carry out inspection and maintenance assessment of power lines in the state.

 

Green energy corridors and REMCs

For the integration of 175 GW of renewable energy by 2022, POWERGRID, along with the involved state utilities, is developing green energy corridors (GECs) to connect new solar and wind capacity. Under GEC-I, where POWERGRID received long-term access applications for 12 GW, over 9,700 circuit km and 19,000 MVA of substation capacity is targeted to be added at the intra-state level and 3,100 circuit km and 17,000 MVA (across six substations) at the interstate level. Most of the schemes under GEC-I have been commissioned at the interstate level. At the intra-state level, 64 per cent or 6,258 circuit km was commissioned up to December 2019. The completion deadline for this phase has been extended to December 2020 from March 2020.

 

In early 2020, POWERGRID commissioned all the 11 renewable energy management centres (REMCs) under GEC-I, allowing centralised forecasting and monitoring of renewable energy generation, which is crucial for its integration into the grid. The REMCs are equipped with artificial intelligence-based renewable energy forecasting and scheduling tools, which provide grid operators with better visualisation and situational awareness. REMCs coordinate with the respective SLDCs and are integrated with existing supervisory control and data acquisition (SCADA) for the despatch of renewable generation. Currently, 55 GW of solar and wind power capacity is being monitored through these 11 REMCs. These REMCs are co-located with the NLDC and SLDCs in Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Madhya Pradesh, Gujarat and Rajasthan, and with the RLDCs in Bengaluru, Mumbai and New Delhi.

 

Under GEC-II, transmission schemes for evacuation of electricity from 34 ultra mega solar power parks (UMSPPs) with a capacity totalling 20 GW have been planned. Of this, evacuation systems from 13 solar parks (9.2 GW) have been identified through the interstate transmission system. Further, POWERGRID is responsible for the implementation of the transmission system for eight solar parks (7 GW) entailing 1,870 circuit km of lines and five substations of 13,500 MVA. So far, POWERGRID has completed the implementation of three solar parks (4,250 MW). Transmission systems at four more UMSPPs are under implementation.

 

Under GEC-III, estimated at INR416.88 billion, the central government has approved transmission schemes for renewable energy zones (REZs) with a potential capacity of 66.5 GW to be achieved by December 2022. This will be implemented in three phases. Phase I will involve renewable energy capacity of 12.4 GW at an investment of INR109.7 billion, Phase II involves a capacity of 26.1 GW at an investment of INR183.67 billion while Phase III will take care of the remaining 28 GW of renewable energy capacity at an investment of INR124.14 billion. The three phases are scheduled to be completed by March 2021, December 2021 and December 2022 respectively.

 

Further, renewable energy potential of 65.5 GW has been identified across eight states for commissioning between 2022 and 2025. The associated transmission system will involve an investment of INR640.43 billion.

 

To prepare the grid for the future, transmission planning includes studies considering different scenarios for renewable generation evacuation; reactive power management at the all-India level; synchronous condensers new renewable energy (RE) pooling stations; ensuring adequate short circuit ratio at RE interconnection points and N-1 of interconnecting transformers (ICTs) at RE pooling stations.

 

Competitive bidding

To fast-track the development of the country’s transmission network, TBCB was introduced in 2006. As of August 2020, 50 transmission projects (excluding cancelled and under-litigation projects) were awarded under TBCB. Of these, 28 projects have been commissioned while the rest are under construction. Further, of the awarded projects, 35 were secured by private players, while 15 projects were bagged by POWERGRID. The TBCB projects comprise 5.4 per cent of POWERGRID’s total value of assets.

 

Among the private sector projects, 20 projects worth at least INR210 billion have been commissioned, and 15 projects worth at least INR215 billion are under construction. Sterlite Power Transmission Limited (SPTL), with 15 projects, leads the private sector, followed by Adani Transmission Limited (ATL) with a portfolio of 12 projects. In fact, SPTL added the latest project to its portfolio in June 2020.

 

Presently, REC Transmission Projects Company Limited and PFC Consulting Limited, the two bid process coordinators for TBCB projects, are in the process of tendering seven projects each. In addition, in May 2020, the reconstituted National Committee on Transmission (NCT) notified 35 approved transmission projects worth INR271.8 billion. Of these, INR234 billion worth of transmission projects associated with renewable energy projects in western (24 GW), southern (8.5 GW) and northern (8.1 GW) regions will be offered through TBCB, and above INR38 billion worth of projects will be developed by POWERGRID through the regulated tariff mechanism.

 

Despite the success of TBCB at the interstate level, only a handful of intra-state transmission projects have been developed by private players. States such as Maharashtra, Madhya Pradesh, Uttar Pradesh, Assam, Bihar and Jharkhand have adopted the TBCB route to award projects.

 

Private sector activity

Consolidation in the private transmission space continued during the year. In July 2020, ATL signed definitive agreements with Kalpataru Power Transmission Limited (KPTL) for acquisition of Alipurduar Transmission for a value of INR12.86 billion. This acquisition, which is subject to regulatory approval, will help the former achieve its target of setting up 20,000 circuit km of transmission lines by 2022. With the latest acquisition, ATL’s cumulative network crosses 15,400 circuit km, divided into 12,200 circuit km of operational assets and over 3,200 circuit km of under implementation assets. Previously, ATL and Tata Projects had reportedly been in talks with Essel Infraprojects Limited for the acquisition of its under-construction 765 kV Warora–Kurnool transmission line. In 2018, Essel Infraprojects sold two of its transmission assets to Edelweiss Infrastructure Yield Plus fund and gave it the right to acquire two more of its assets including the Warora–Kurnool line. Edelweiss is no longer interested in buying the asset. The project has been impacted by severe time delays as the project’s scheduled commissioning is past its November 2019 deadline.

 

SPTL has been liquidating its operational transmission assets though the country’s leading InvIT, India Grid Trust (IndiGrid), set up in 2016. In August 2020, IndiGrid completed its latest acquisition of Gurgaon–Palwal Transmission Limited (GPTL) (worth INR10.8 billion) from SPTL. This acquisition has increased the assets under management (AUM) for IndiGrid by about 9 per cent, which amounts to INR13.3 billion in total. IndiGrid’s asset portfolio now comprises 10 power transmission projects, with a total network of 25 power transmission lines and 7 substations, extending over 6,080 circuit-km and 10,735 MVA in 15 Indian states.

 

Strengthening cross-border links

During 2019-20, three new cross-border links have been proposed for further strengthening interconnections with the neighbours. These are the 400 kV Butwal (Nepal)–Gorakhpur (India) link, the Madurai (new) (India)–New Habarana (Sri Lanka) HVDC line with two 500 MW HVDC terminals in two phases, and the 765 kV Katihar (India)–Parbotipur (Bangladesh)–Bornagar (India) line. These are new interconnections in addition to those already under implementation—the 400 kV Jigmeling (Bhutan)–Alipurduar (India) transmission line (for evacuation of power from various hydro projects); the 400 kV Baharampur (India)–Bheramara (Bangladesh) second line; and the upgrade of the Surajmaninagar (India)–Comilla (Bangladesh) line at 400 kV along with the 500 MW HVDC back-to-back at Comilla. The plan is to increase the cross-border capacity with Bhutan, Bangladesh, Nepal and Myanmar from the current 3,830 MW to 6,450 MW in the medium term.

 

Challenges and outlook

Several challenges need to be resolved to ensure that the grid expansion plans are on track. Due to lack of harmonisation of policies and regulations across states, developers face issues in project development particularly in securing RoW and obtaining environmental and forest clearances. While developers have taken steps to overcome RoW challenges by deploying advanced design and technology options for towers and transmission lines, advanced technological options cannot be deployed across all projects. Empowering system operators and regulators, particularly at the state level, to ensure effective implementation of relevant policies and regulations is essential. Sporadic policy decisions at the state level, such as that taken by the Andhra Pradesh government to withdraw connectivity approvals to several wind projects in the state and renegotiate power purchase agreements, send the wrong signal to investors.

 

The centre’s proposal to divest the CTU function from POWERGRID is a positive step and shows the seriousness of the government in providing a level playing field to private investors. The robustness of the transmission grid and the system operation capability were demonstrated during the COVID-19 lockdown. It is necessary to continue efforts to augment the transmission infrastructure, as well as improve grid flexibility and resilience to support the shift in the generation mix and distribution loads.